Construction-Related Issues Pose Most Credit Risk for New U.S. Nuclear Plants, Report Says

Oct. 15, 2008

Construction risk is the overriding risk for new U.S. nuclear power
plants, according to a report published today by Standard & Poor's Ratings
Services, "Construction Costs To Soar For New U.S. Nuclear Power Plants". We believe that labor and material cost increases are particularly acute for
nuclear plants given their specialized labor needs, material intensity, and
a tight supply chain for key components. The scanty construction track
record for the new technologies and an untested regulatory process only
complicate the risks.

We have broadly categorized risks pertaining to power plant
construction issues in four categories. While some of these are also
applicable for other types of power plants, we believe that the issues are
more acute in the case of nuclear power:

-- Cost inflation in input materials and labor, especially
nuclear-related labor;

-- Unavailability of turnkey engineering, procurement, and
construction (EPC) contracts and supply chain bottlenecks;

-- A limited construction track record; and

-- The Nuclear Regulatory Commission's (NRC) supervision process.

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